Financial Position Elegant Hotel Vs Easy Hotel Plc †Free Sample

Question: Discuss about the financial position of Elegant Hotel? Answer: Introduction Ration analysis is the analysis of financial data of financials. It is based on Items or informations provided in the Balance Sheet, Income Statement Etc. It is used to measure the organisation's operating and financial performance. Ratios provide the overview to users of financial statement. Some of the ratio which are calculated are as below of the companies whose summary are stated above:- Users of Financial Statements Internal Users Top Management of the Company Top management includes Board of directors, Seniors Managers, Managing Directors etc. of the company. They are concerned with the direct decision making of the company. They need a financial statement to assess the financial performance and position of the company while taking appropriate decisions to improve companys future results. Debtors Turnover Ratio Particulars 2015 2014 2013 ELEGANT HOTEL PLC Debtors 3.2 3.99 2.11 Sales 60 58 52 Working 0.16 0.16 0.14 Debtors Turnover (in Days) 19.47 25.11 14.81 EASY HOTEL PLC Debtors 0.37 0.81 0 Sales 5.54 3.54 2.64 Working 0.02 0.01 0.01 Debtors Turnover (in Days) 24.38 83.52 0.00 (Annual Report, n.d.), (HARGREAVES, n.d.) Analysis:- It shows the time gap between credit sales and the cash collection Summary:- ELEGANT HOTEL PLC :- Debtors turnover of the company has improved from the past years and company should try to maintain its ratio. EASY HOTEL PLC :-The Company should control its ratio as its compitors are maintaining good ratio as compared. Sales to Working Capital Ratio Particulars 2015 2014 2013 ELEGANT HOTEL PLC Sales 60 58 52 Working Capital -0.93 -1.66 4.02 Sales to Working capital Ratio -64.52 -34.94 12.94 EASY HOTEL PLC Sales 5.54 3.54 2.64 Working Capital -3.74 -2.61 -8.68 Sales to Working capital Ratio -1.48 -1.36 -0.30 (Annual Report, n.d.), (HARGREAVES, n.d.) Analysis:- Sales to working Capital shows that how much times is the sales against working capital Employees Employees are the human resources of the company. They are the asset of the company in which they are working. They would give their best to the company if the company is paying suitable incentives (both monetary and non-monetary) to them. With the help financial statements employees of any organization can assess the profitability of the company and its capacity to distribute such profit to its employees. Financial statements help employees to know the consequence of the companys position on their remuneration. Operating Profit Ratio Particulars 2015 2014 2013 ELEGANT HOTEL PLC Operating Profit 8.94 14 11 Revenue 60 58 52 OP Ratio [(Operating Profit/Sales *100)] 14.90 24.14 21.15 EASY HOTEL PLC Operating Profit 0.93 0.68 1.34 Revenue 5.54 3.54 2.64 OP Ratio [(Operating Profit/Sales *100)] 16.79 19.21 50.76 (Annual Report, n.d.), (HARGREAVES, n.d.) Analysis:- Operating profit ratio shows the Companys profitability from its main operation. Higher the ratio, better is the company. Summary:- ELEGANT HOTEL PLC:- OP ratio of this company shows that profit of the company are increasing in the first two years while it is decreasing in the current year. It shows that company should control its expenses to increase its profit margin. EASY HOTEL PLC :- OP ratio of this company shows that profit of the company has decreased over last two years. It shows that company should control its expenses to increase its profit margin. Shareholders Shareholders are the persons who entrust their valuable resources in the hands of the management of the company with good faith in order to get high returns. So with the help of financial statements, shareholders can examine that whether their money has been utilized for the defined purpose or they are being deceived. Financials of a company can help them in analyzing the profitability and viability of the investment made by them. They can also assess the risk and return of the investment and can take future suitable decisions. Debt to Equity Ratio Particulars 2015 2014 2013 ELEGANT HOTEL PLC Debt 46 117 121 Equity 106 43 34 Debt to Equity Ratio 0.43 2.72 3.56 EASY HOTEL PLC Debt 7.2 7.2 0 Equity 32 33 3.41 Debt to Equity Ratio 0.23 0.22 0.00 (Annual Report, n.d.), (HARGREAVES, n.d.) Analysis:- Debt to Equity shows that the organisation has how much of debt and remainning is equity. Ideally it should be 50% Summary:- ELEGANT HOTEL PLC :- Earlier the Debt to Equity ratio of company was higher but now it is controlled and as per standards EASY HOTEL PLC :-The Company's ratio is good as per the standards and company is maintaing its ratio. Debt to Asset Ratio Particulars 2015 2014 2013 ELEGANT HOTEL PLC Debt 46 117 121 Assets 162 169 162 Debt to Asset Ratio 0.28 0.69 0.75 EASY HOTEL PLC Debt 7.2 7.2 0 Assets 44 44 13 Debt to Asset Ratio 0.16 0.16 0.00 (Annual Report, n.d.), (HARGREAVES, n.d.) Analysis:- It is used to calculate that how much of assets are being funded by the debt Summary:- ELEGANT HOTEL PLC :- It is visible that company has improved its ratio by reducing the debt. EASY HOTEL PLC :- It is visible to that the debt was less in the company finance portfolio. As far as concern the comoany is continuously maintain the same debt to asset ratio. External users Banks and Financial Institutions For doing day to day operations company needs more and more funds. So it approaches bank and financial Institutions for borrowing monies. In such case banks and institutions need Financials of the company to decide whether to grant the loan or not. Financial statements clearly show bank officials the financial health of the company. They can judge with the help of its profitability and liquidity, whether the company will be able to repay the principle with due interest on time or not. Liquid Ratio Particulars 2015 2014 2013 ELEGANT HOTEL PLC Liquid Assets 9.21 16.8 11.97 Current liabilities 12 15 14 Liquid Ratio (Liquid Assets/ Current Liabilities) 0.77 1.12 0.86 EASY HOTEL PLC Liquid Assets 23 24.89 0.85 Current liabilities 4.11 3.47 8.71 Liquid Ratio (Liquid Assets/ Current Liabilities) 5.60 7.17 0.10 (Annual Report, n.d.), (HARGREAVES, n.d.) Analysis:- Liquid ratio is the abality of a company to meet its financial obligations in very short term Summary:- ELEGANT HOTEL PLC :- Liquid Ratio of this company shows that the company needs to improve its liquidity. At least Liuid ratio should be 1. EASY HOTEL PLC :- Liquid ratio of the company is very good. It can easily pay its short term financial liability. Current Ratio Particulars 2015 2014 2013 ELEGANT HOTEL PLC Current Assets 12 19 15 Current liabilities 12 15 14 Current Ratio (Current Assets/ Current Liabilities) 1.00 1.27 1.07 EASY HOTEL PLC Current Assets 23 25 0.88 Current liabilities 4.11 3.47 8.71 Current Ratio (Current Assets/ Current Liabilities) 5.60 7.20 0.10 (Annual Report, n.d.), (HARGREAVES, n.d.) Analysis:- Current ratio is helpful in calculating liquidity position of the company. Idle ratio is 2:1 Summary:- ELEGANT HOTEL PLC :- The company's lquidity ratio is less than standard which cleary means that the company is short of liquid resources. EASY HOTEL PLC :- Current ratio of the company in 2013 is less but company improved its position in later years. But ratio is too high which means that company have idle resources which are not being utilised properly. Government The Government requires financial statements of a company for various purposes. Government levy taxes on the profits of the company. So to assess the correctness of the tax calculated and paid by the company government needs financials of the company. Moreover government has to evaluate the position of the economy by computing the financial position of companies in various industries for its various relevant decision relation to fiscal and tax norms. Net Profit Ratio Particulars 2015 2014 2013 ELEGANT HOTEL PLC Net Profit 4.89 9.39 6.11 Revenue 60 58 52 NP Ratio [(Net Profit/Sales *100)] 8.15 16.19 11.75 EASY HOTEL PLC Net Profit 0.61 0.41 1.01 Revenue 5.54 3.54 2.64 NP Ratio [(Net Profit/Sales *100)] 11.01 11.58 38.26 (Annual Report, n.d.), (HARGREAVES, n.d.) Analysis:- Net profit ratio measures the profitabilty of a company in relation to its sales. Higher the ratio, better is the company. Summary:- ELEGANT HOTEL PLC :- Net Profit ratio of this company shows that profit of the company are increasing in the first two years while it is decreasing in the current year. It shows that company should control its expenses to increase its profit margin. EASY HOTEL PLC :- Net Profit ratio of this company shows that profit of the company has decreased over last two years. It shows that company should control its expenses to increase its profit margin. Prospective Investors In todays scenario people want to invest their idle funds in such instruments where they can earn high returns. If the financials of a company are showing better performance of the company then such investors would endow their funds in the company. Financial statements allow potential investors to evaluate the viability of investing by clearly showing profitability of the company, its earnings in totality and per share, etc. Comparison of financial statement s of two or more years could help new investors to calculate risk and return in a better way. Return On Equity Particulars 2015 2014 2013 ELEGANT HOTEL PLC Net Profit Available for Equity Shareholders 21 11 7.12 Equity 106 43 34 ROE Ratio [(NP available for ESH/Share Equity *100)] 19.81 25.58 20.94 EASY HOTEL PLC Net Profit Available for Equity Shareholders 0.67 0.8 1.01 Equity 32 33 3.41 ROE Ratio [(NP available for ESH/Share Equity *100)] 2.09 2.42 29.62 (Annual Report, n.d.), (HARGREAVES, n.d.) Analysis:- Return on Equity tell us that how much a investor earn on his investment. It is calculated in the percentage. Summary:- ELEGANT HOTEL PLC :- Return on equity of this company shows that profit of the company are for the investor is being around 20 to 25 % which is goo for the investors EASY HOTEL PLC :- Return on equity of this company shows that profit of the company is low as per Elegant Hotel PLC. It shows that company should control its expenses to increase its profit margin. Brief Summary about Company Elegant Hotels Group plc and all of its subsidiaries are engaged in the operation of hotels and restaurants. They have hotels on the island of Barbados. This Company is having ownership and operatesnearly five hotels (freehold). Daphne's (Italian beachfront restaurant) on the island of Barbados. Every hotel is a unique type of operating segment of the Company. The properties of the company (freehold), is total aggregate plot size of approximately 20 acres. Company has beachfront of 2,300 feet(approximately). The Company is having 480 rooms in its. Colony Club, Tamarind, The House, Crystal Cove and Turtle Beach are the five hotels of the company. Four (Out of Five) hotels are situated in Barbados known as the Platinum Coastalong the west coast. (Equities, n.d.) EasyHotel plc is a United Kingdom (UK) based owner, developer, operator. It has UK based franchisor of Easy Hotel branded hotels. Two segments are operated by the company and they operate it through: Owned properties and Franchising. The properties which are owned by company in segments and the operations related to them have been processed out it the company owned hotels and estates. Franchising segment which is being given to others on the basis of license of the companys brand name. 21 hotels and which are operational also are owned by the company. Three out of above hotels have around 390 rooms and 18 out of the above hotels have around 1450 rooms, which yields more. The company has its operations in around nine countries. The company sell its products which are its wholly owned through website.Hotels which are owned by company are located at Old Street in London, Glasgow and Croydon. EasyHotel UK Limited is its wholly owned subsidiary. Conclusion On the basis of our analysis it was found that the financial position of Elegant Hotel Plc is more sound in comparision to the Easy Hotel Plc .First coming to net profit ratio, Easy Hotel is having upper hand as compare to Elegant Hotel. Now if we look at the operational performance of both the company than it looks that both are operating at same level. While analyzing return to investors it seems that Elegant hotel is giving more return to the investors which is good for the valuation of Elegant Hotel but at the same time Elegant has to maintain its liquidity As liquid ration is too low of the Elegant Hotel. Whereas Easy Hotel is giving Constant return but they are mainating their liquidity which will Easy Hotel to meet their Short term liability. Same is the case with Current ration, Easy Hotel are placed safe but Elegant Hotel has to maintain their Current assets ratio and Liquid ratio. While going through the Debt to Asset ratio, both company are in line with the required ratio. Equity participation are both the company are good as debt are less than equity which will help company for future growth. 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